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ADGM and Abu Dhabi courts – a memorandum of understanding

ADGM and Abu Dhabi courts – a memorandum of understanding

Regional Capabilities:

April 11, 2018

On 4 April 2018, the Abu Dhabi Global Market Courts (ADGM Courts) announced in a press release that it had entered into a memorandum of understanding (MoU) with the Abu Dhabi Judicial Department. The MoU was signed on 11 February 2018.

The MoU will allow for the reciprocal enforcement of judgments, decisions, orders and arbitral awards between the ADGM Courts and the Abu Dhabi courts.

This is a significant step in the development of the Abu Dhabi Global Market (ADGM) and the wider UAE legal scene.

The ADGM

The ADGM established a financial free zone in Abu Dhabi with its own legal system to encourage foreign businesses to carry out operations from the Emirate. Much like the Dubai International Financial Centre (DIFC), the legal framework of the ADGM is based on English law, and stands apart from Abu Dhabi's "onshore" legal system.

The MoU

The MoU seeks to address a long-standing issue that foreign and local entities alike face when seeking to resolve their disputes in the UAE (or when enforcing their judgments or awards there).

While many entities prefer to refer disputes to arbitration or to the offshore courts instead of local courts, the recognition and enforcement of those judgments and awards before the local courts has not, historically, been a straightforward process.

More specifically, there has been uncertainty as to whether judgments from the ADGM Courts would be recognised in the Abu Dhabi courts, and vice versa. There has been no clear regime on how the two institutions were intended to interact.

The MoU seeks to address this by providing a clear regime for the reciprocal enforcement of judgments.

Article 2 of the MoU states: "the Courts wish to enter into this MoU so that they can formalise the agreed procedures for the reciprocal enforcement of their judgments, decisions and orders, and arbitral awards ratified or recognised by them without re-examining the substance of the dispute on which they have been issued."

It is, plainly, of utmost significance that the MoU expressly states that the reciprocal enforcement shall occur "without re-examining the substance of the dispute".

Articles 6-10 of the MoU set out the mechanism for the enforcement of Abu Dhabi courts' judgments in the ADGM and Articles 11-15 set out the mechanism for the enforcement of ADGM Courts' judgments in Abu Dhabi. In both instances it is contemplated that a mechanistic process be followed that is, ostensibly, similar to that used by the DIFC courts and onshore Dubai courts (Dubai Law No 12 of 2004).

Furthermore, Article 5 of the MoU seeks to eliminate the difficulty in getting arbitral awards recognised. Under Article 5, once such awards are ratified or recognised by the applicable court, they fall within the definition of "judgment" for the purposes of the MoU and they too will be automatically enforced without the merits being re-examined, in accordance with Article 2.

A conduit jurisdiction?

Naturally there will be a temptation amongst practitioners to draw a parallel between this regime and the use of the DIFC courts as a conduit jurisdiction. This temptation will be all the greater given the recent curtailment of that conduit jurisdiction and the possibility of the MoU being used to circumvent this curtailment by providing a mechanism to transport judgments or awards unchallenged into the onshore UAE via the ADGM and the MoU.

It is too early to tell whether that will be its effect, although no doubt this issue will be tested in the near future.

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